Heroes and Leaders

Honesty and politeness are in short supply.

Imagine the worst of times in business. Did you think of 1929, the 1960s, 1973, 2001, 2008, or 2020, to name a few? Political upheaval and business uncertainty often go hand in hand.

Throughout history, there have been heroes and villains, but hopefully the good guys prevail in the end. We punish athletes who cheat, and we try to punish thieves in the business world. Using steroids is cheating, and so is cooking the books.

Every term that I start teaching Business Ethics to students at UTPB, including students who will someday be CPAs, I examine how I approach my daily life and interact with others. And I examine my own ways of reviewing my decisions both large and small.

We all have our heroes. One of mine is Sherron Watkins, of Enron fame. I have written about Ms. Watkins before. We were sorority sisters at UT Austin and, taking that classy bunch on the whole, she especially turned out to be someone made of the Right Stuff. Ms. Watkins worked at Enron for years. In 2001, Ms. Watkins, then a Vice President, reported accounting irregularities to CEO Ken Lay, which would ultimately lead to the demise of Enron. From what I understand, she did not stand alone; nevertheless, calling out misdeeds is never easy and can have life- and career-long consequences.

Later, she was selected as one of three “Persons of the Year 2002” by TIME Magazine. If you want to learn more about what I consider a lesson for every business, you can still get a copy of Power Failure: The Inside Story of the Collapse of Enron by Ms. Watkins and Mimi Swartz of Texas Monthly fame.

I’ll share my advice for adult students who face ethical dilemmas, as we all do. For them, I review the good, bad, and the ugly about reporting their company’s perceived misdeeds. Often, such students, confronted with wrongdoing, resign from their jobs and move on, looking for a better employer. High turnover usually sends signals to prospective employees that there is trouble in River City. That figure of speech—River City—is a nod to the fictional setting of the musical The Music Man. The title character is a con man who plays upon parents’ worries of corrupted youth to sell those parents band instruments for their kids as a way of keeping them occupied and thereby fending off bad influences. The idea behind “River City,” then, is that corruption can happen even in the most wholesome environments, unless vigilance is practiced. As an employer, you must pay attention to your turnover—in your own River City—across both the whole organization and within each department. Do not turn a blind eye to any of your supervisors.

Why am I bringing all this up again? Ethics and honesty in your business dealings are essential for effective leadership. You cannot teach it, but you can demonstrate it by example. Take a moment and ponder when you have been asked to do something morally wrong by someone with whom (or for whom) you work. What did you do? How did you feel? Did you do the right thing, or did your decision keep you up at night? There is a difference between stealing to feed your family and stealing for fun.

I thought of Ms. Watkins after reading about another gentleman who bravely did not go with the flow, the easy path, and called out Enron when it was needed. Recently, he passed away in Houston. His name was John Olson. He was an energy analyst who would not recommend Enron to investors and lost his job at Merrill Lynch three years before the Enron scandal broke in 2001. Fast forward 20 years or so later and, according to Mrs. Olson, Jeff Skilling (former CEO of Enron) was at the River Oaks Country Club (ROCC), and Mr. Olson went over and spoke to him, showing some graciousness. Mr. Olson may serve as a role model for us all. Was he choosing his battles, turning the other cheek, or simply being a forgiving man? It doesn’t matter except to say that his example is a better strategy. Politeness in the light of differences is in short supply.

ROCC was and is a place where civility and traditional Southern manners are expected. I have many memories of ROCC, from having lunch with Governor Mark White to attending Lamar High School Reunions as a guest, as I graduated from Houston’s Robert E. Lee High School. I also attended multiple wedding receptions at ROCC, and my most recent visit was for a friend’s funeral. On that occasion, BEVO, yes BEVO, greeted the guests at the entrance. A scene from Charlie Wilson’s War was filmed in a hallway at the club.

As a native Houstonian, I can say that the civility that passed between Olson and Skilling was not how Texans are typically depicted in the dramatic series Landman. Is Billy Bob the hero? Will he save the day for the Demi Moore character, his friends, the employees, and, above all, his family? Billy Bob’s character faces many immoral choices in a single day. Are the storylines a depiction of real life? Art imitates life, or does it? At least there are some Texas connections for the main stars. Demi Moore spent some of her formative years in the Southwest, and the only time I’ve ever seen Billy Bob Thornton, who is from Arkansas, was at an outdoor bar in West Odessa, where he was performing with his band. I keep thinking of the scene at the luncheon when Demi Moore addresses the male-dominated room and later has an encounter at dinner with Andy Garcia. Both moments sizzled with intensity. Good writing makes just about anything believable or at least entertaining. But does the show reflect real-life Permian Basin ethics? Whatever the answer, I love the show, and it has sparked increased interest among students in pursuing a career in the oil industry.

In past articles I have referenced the stock market crash of 1929, which led to what historians refer to as the Great Depression. Fast forward to my childhood, where we all hid under our desks to save ourselves from the bomb and watched countless assassinations on our televisions. I am also old enough to have had my first car in 1973 and remember waiting in lines to get gasoline for my little Nissan. I escaped the housing crisis of 2008 because I had the good sense to secure a fixed home loan. However, as part of my job, I was responsible for allocating millions of dollars in federal government assistance to support public education. We are still paying for that one. The 2020 COVID-19 funds from the federal government were allocated, and then, when they disappeared, people lost their jobs, and essential services were cut. I am getting political, but I am not one to believe in bailouts.

Enron filed for bankruptcy in December 2001. Laws were passed, and the accounting firm, Arthur Andersen, failed, and multiple people lost their jobs and credentials. I cannot stress enough the responsibility of your CPAs. In 2005, the US Supreme Court overturned the Andersen conviction due to flawed jury instructions; however, the damage had already been done.

Andersen has risen from the ashes and, in 2014, was rebranded Andersen Global. Good for them.

However, following upon the Enron debacle and other corporate scandals, such as the one involving WorldCom, the Sarbanes-Oxley Act was passed, establishing stricter rules for auditors and mandating that auditing and consulting services be separated. Employees of multiple companies that Enron had acquired were also left with pennies-on-the-dollar retirement payouts because their 401(k) plans were tied to Enron.

Enron built its empire primarily between 1985 and 2001. Enron merged with Houston Natural Gas and also acquired other companies. Before 2001, Enron had between 20,000 and 30,000 employees. Enron’s reach was worldwide, and in 1999, it invested in Enron Broadband Services (EBS), which aimed to revolutionize energy trading on the internet.

Enron’s rise to fame is a cautionary tale for many. I am reading 1929, by Andrew Ross Sorkin (published last year), and the story does remind me of modern times. No doubt, that is the intention of the author, but it’s a good read. I encourage my students to watch The Big Short (2015) and Too Big to Fail (2011), both of which explore the 2008 housing crisis.

In conclusion, there have been tough times, but the Enron scandal, like the stock market crash of 1929, remains a primary historical reference for businesses. When speculators throw caution to the wind or greed gets the best of us, ethics and honesty may go out the window.

What is the lesson to be learned in a financial crisis that affects the entire country, if not the world? You and your descendants will be paying for the bailout for decades to come. Big government comes in to save the day, and all of us pay for it.

Your legacy is your company, and the reputation of your River City is held in the hands of your business colleagues and employees.

“Your employees are the heart of your organization.” Dr. Michele Harmon is a Human Resource professional, supporting clients in Texas and New Mexico that range in size from five to more than 3,000 employees. Email: micheleharmon1@gmail.com